Humped, Dumped and Trumped: Globalization in Trouble

Peter Tasker

Peter Tasker

Reality TV has nothing on this: Donald Trump has just been elected the forty fifth president of the United States. As with the Brexit vote of last June, the result confounded the expectations of forecasters and betting markets and ran counter to the advice of most of the political establishment, big media and opinion-makers.

How Trump will govern remains to be seen – the American system has many inbuilt checks and balances – but American voters’ desire for change was unmistakeable and he will be expected to deliver. Specifically, there was a powerful reaction against the globalization from which Asian economies have benefitted so much over the past decades. The welfare of Americans – especially the middle- and working-class groups whose incomes have been stagnating for years – will have much greater priority than smooth relations with trading partners in Asia and elsewhere.

According to Professor Cas Mudde of the University of Georgia, “populism brings to the fore issues that large parts of the population care about, but that the political elites want to avoid discussing… Populism behaves like the drunken guest at a dinner party, who doesn’t respect the rules of public contestation but spells out the painful but real problems of society.”

Trump saw the gap in the American market for that kind of role and filled it with aplomb. In a thoughtful speech at the National Press Club, famed Silicon Valley investor Peter Thiel explained why he was supporting Trump. The status quo, he declared, was broken. In particular he pointed to the failure of free trade to lift middle-class living standards and America’s engagement in several military conflicts that could spiral into larger-scale conflagrations. Hillary Clinton, in Thiel’s view, meant more of the same, while Trump stood for disengagement from the wider world and closer attention to the healing of American domestic ills.

TRUMP RODE TRENDS ALREADY IN PLACE

Expansion of trade and the use of military might to combat challenges to the Western-dominated liberal world order have been key elements of the bipartisan consensus that has supported America’s superpower status for the past seventy years. Already, though, they had been downgraded under President Barack Obama. The Trans Pacific Partnership (TPP) is a U.S.-backed strategic initiative aimed at creating a trading bloc of twelve nations following agreed rules of economic behaviour, but pointedly excluding China. Obama favoured the pact, but lacked the political capital and / or will to push it through Congress.

As Secretary of State Hillary Clinton was in charge of the negotiations and referred to the TPP as “the gold standard” of such deals. As presidential candidate she opposed it, bowing to the powerful anti-trade sentiment on both the left and right. The coming of President Trump means it is now safe to read the TPP’s last rites., but it was effectively brain-dead already.

In geopolitical terms, the take-home was already clear. The U.S. failed to deliver on its own initiative and lost the chance to steal a march on China. The speed with which China launched its own strategic concept, the Asian Infrastructure Investment Bank, made for a telling contrast. One country sees the build-out of global economic architecture as vital to its interests; the other does not.

RATIONAL DUTERTE

Obama also chose not to escalate the conflict over China’s territorial claims in the South China Sea and related construction of artificial islands. U.S. passivity in the face of Chinese intransigence may be one of the factors that led Philippine President Rodrigo Duterte to stage his sudden “goodbye to America” and pivot to China. Duterte is often portrayed in the Western media as a loose cannon who operates on whim and personal grievance, but hedging his country’s bet on the U.S. may prove to be a far-sighted strategic move. With Malaysia planning joint military exercises with China, others could follow suit.

Hedging is rational because the U.S.’s lack of commitment is rational too. The U.S. is in Asia from choice, not necessity. Seen from Washington, a China-dominated East Asia with trade and capital flows continuing as now is a far better scenario than military conflict or an economically damaging cold war. China knows that and so do its neighbours. In his campaign, Donald Trump suggested that Japan and South Korea take responsibility for their own defence, developing their own nuclear weapons if necessary. Playing the part of the “drunken dinner party guest,” he was pointing to a reality that nobody wants to discuss – that the interests of America and its allies are no longer aligned.

ABE VINDICATED ON CONSTITUTIONAL REFORM

In Japan’s case, the way forward is clear. Rather than entrusting its own defence to the U.S. -Japan Security Treaty, as it has for the last seventy years, it needs a Plan B, which is the capability to operate independently in both military and diplomatic terms. Japan’s U.S.-imposed pacifist constitution, with its prohibition of “military potential” and implicit prohibition of alliance-building and overseas deployments, will need to be updated if Japan is to maximize its strategic options.

Fortunately, the prospects for constitutional reform are now brighter than ever before. Prime Minister Shinzo Abe’s series of landslide election victories has given him dominance of both houses of the Diet. Constitutional changes also require approval by a simple majority of the public as expressed in a national referendum. Here too a significant shift has taken place. A recent Nikkei poll showed that 44% are in favour of change versus 42% against. This is the first time that Japanese public opinion has been pro-revision. Interestingly younger voters are the realists, while the over-70s are the bastions of pacifist idealism. This suggests that constitutional revision is just a question of time, as is Japan’s reversion to the status of “normal” nation.

Trump is a businessman and a deal-maker. He knows that your starting bid is never what you end up with, but a tough initial stance is helpful to a good outcome. Harsh rhetoric on trade barriers, tariffs and treaties will come into conflict with the complexities of reality.

Yet uncertainty has now risen dramatically and risks need to be hedged, especially in Asia. Countries like Japan, India, Russia and China will be looking for new trading and security arrangements. Surprising new configurations may form. Meanwhile, under the threat of tariffs and quotas, Asian companies may need to shift from exporting to the lucrative U.S. market to manufacturing there – as Japanese auto companies had to in the 1980s.

Trump’s victory was the political expression of a long, accretive process that cannot easily be rolled back. We cannot return to 2006 or October 2016 any more than we can step into the same river twice. Like it or not, we are now living in a Donald Trump world.